Moody's Investor Service retains rating on all three Indian oil marketing firms

Moodys Investor Service on Thursday retained its Baa3 rating for all three state-run Indian oil marketing companies (OMCs) on the basis of continued improvement in their credit metrics.IANS | Updated: January 06, 2017, 09:11 IST

New Delhi: Moodys Investor Service on Thursday retained its Baa3 rating for all three state-run Indian oil marketing companies (OMCs) on the basis of continued improvement in their credit metrics.

"Moody's Investors Service has affirmed the Baa3 ratings of India's three state-owned oil refining and marketing companies -- Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL)," the American rating agency said in a release.

"The outlook on the ratings of all three oil refining and marketing companies is positive," it said.

"The ratings affirmation reflects the continued improvement in the credit metrics of the three oil refining and marketing companies, as diminished levels of fuel subsidies and moderated working capital requirement - resulting from low oil prices - have reduced borrowings," Moody's Vice President Vikas Halan said in the statement.

Baa3 rating indicates moderate credit risk.

Moreover, OMCs' earnings have improved as the commissioning of new capacity and higher marketing margins have more than offset weaker refining margins, Moody's said.

"We expect the earnings of the state-owned refiners to improve as their additional capacities become fully operational during fiscal 2018," Halan added.

"As a result of better earnings and lower borrowings, the credit metrics of the oil refining and marketing companies have improved to levels that are more consistent with a higher baseline credit assessments (BCA)," the ratings agency said.

It noted, howvever, that the Indian OMCs plan to invest in upstream assets through acquisitions.

“To save the environment and to fight climate change, my government has planned a major campaign. By 2022, we want to generate 175 GW of renewable energy. In the last three years, we have already achieved 60 GW or around one-third of this target,” he said.